Reputation and Production Standards
This paper analyzes a monopolist's behavior when consumers cannot observe the production standards. These types of products are usually known as credence goods. The steady-state level of quality with credence goods is found to be lower than that with experience goods, and perfect information goods. The finding that only perceived quality, which is effectively a filtered version of true quality, affects reputation indicates rewards for high quality production are lower in the credence good case. Further, an increase in the level of monitoring can increase the true level of product quality in the market for credence goods.
Volume (Year): 30 (2005)
Issue (Month): 01 (April)
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- Sheshinski, Eytan, 1976. "Price, Quality and Quantity Regulation in Monopoly Situations," Economica, London School of Economics and Political Science, vol. 43(17), pages 127-37, May.
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- Doughety, Andrew F & Reinganum, Jennifer F, 1997. "Everybody Out of the Pool: Products Liability, Punitive Damages, and Competition," Journal of Law, Economics and Organization, Oxford University Press, vol. 13(2), pages 410-32, October.
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